Jan. 24 (Bloomberg) -- State attorneys general reviewed a proposed settlement with banks over foreclosure and mortgage-servicing practices that negotiators are pressing to complete as Delaware said it would reject a deal said to total $25 billion.
Representatives of Democratic attorney general offices met at a Chicago hotel yesterday to discuss the negotiated terms and ask questions, said Iowa Attorney General Tom Miller. Miller, who is helping to lead talks, said an agreement with the banks is getting closer.
“There are still issues to be worked out,” Miller said in an interview. “This is one step along the way, and it was a very productive day.”
State and federal officials have been negotiating a settlement with the five largest mortgage servicers -- Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co. and Ally Financial Inc. Talks were triggered by disclosures that the companies were using faulty documents in seizing homes.
The $25 billion deal would fund loan principal writedowns for homeowners and provide refinancings, a person familiar with the matter said before yesterday’s meeting. The proposal also sets requirements for how the banks conduct home foreclosures. The settlement would drop to $19 billion if California Attorney General Kamala Harris decides not to sign on, the person said.
Delaware Attorney General Beau Biden won’t sign on to the proposed agreement as drafted, Delaware Deputy Attorney General Ian McConnel said in a phone interview. He declined to comment on the reason for Biden’s decision.
Biden has been among a group of attorneys general, including New York’s Eric Schneiderman and Harris in California, who have said any settlement shouldn’t protect banks from claims that haven’t been fully investigated, such as claims stemming from the packaging of mortgages into securities sold to investors.
Shum Preston, a spokesman for Harris, declined to comment on whether the state would agree to the deal. In September, Harris called a proposed deal with the banks inadequate, saying it would allow too few California homeowners to stay in their homes. Harris, who is conducting her own investigation into bank mortgage practices, also raised concerns about the scope of the liability releases that would be given to banks as part of any deal, protecting them from state and federal lawsuits.
“Attorney General Harris has consistently and repeatedly expressed concern about protecting her ability to investigate wrongdoing in the mortgage arena, and that remains a key lens through which she will evaluate any proposals,” Preston said.
Schneiderman, Biden and Nevada’s Catherine Cortez Masto are also conducting mortgage investigations. Massachusetts Attorney General Martha Coakley has sued the five banks involved in the talks.
States weren’t asked at the Chicago meeting to vote on whether to join the settlement, Miller said. He declined to comment on whether there is a deadline to vote or when a final agreement might be reached.
“We have not yet reached an agreement with the nation’s five largest servicers, and we won’t reach a settlement any time this week,” Miller said in a statement yesterday.
Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, also attended the Chicago meeting. Republican attorneys general were scheduled to separately discuss the settlement by phone yesterday.
About a dozen proStesters gathered at the hotel while the meeting was taking place behind closed doors, chanting “No sweetheart deals” and “Protect our homes.”
Shani Smith, 36, of Chicago was among the protesters. Smith, who has been trying to get a loan modification for her mortgage, said she wanted to speak with Illinois Attorney General Lisa Madigan about the accord. They were forced to leave the building.
“We will not settle for a weak settlement,” said Smith, who called the monetary component of the deal “a drop in the bucket.”
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